April 29, 1999
DEAR STOCKHOLDER:
We cordially invite you to attend World Airways' Annual Meeting of Stockholders
to be held on Wednesday, June 9, 1999. Enclosed are a proxy statement and a form
of proxy. Please note that the meeting will commence at 9:00 a.m. at the
Company's headquarters located at 13873 Park Center Road, Suite 490, Herndon,
Virginia 20171.
At the meeting we will ask Stockholders (i) to elect six persons to serve your
Company as members of its Board of Directors; (ii) to ratify and approve an
amendment to the World Airways 1995 Stock Option Plan; and (iii) to ratify the
selection of KPMG LLP as your Company's independent certified public accountants
for the year ending December 31, 1999.
We value your participation by voting your shares on matters that come before
the meeting. Please follow the instructions on the enclosed proxy to ensure
representation of your shares at the meeting.
Sincerely,
/s/ RUSSELL L. RAY, JR.
RUSSELL L. RAY, JR.
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE>
WORLD AIRWAYS, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 20171
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1999
TO THE STOCKHOLDER ADDRESSED:
World Airways, Inc. (the "Company") will hold its Annual Meeting of Stockholders
at 9:00 a.m., on June 9, 1999, at the Company's headquarters, at 13873 Park
Center Road, Suite 490, Herndon, Virginia, for the following purposes:
1. To elect four Class I Directors to serve until the 2002 annual meeting of
stockholders, and two Class III Directors to serve until the 2001 annual meeting
of stockholders, and thereafter until their successors have been duly elected
and qualify;
2. To ratify and approve an amendment to the World Airways 1995 Stock Option
Plan (the "1995 Option Plan") to increase the number of shares of the Company's
common stock reserved for issuance under the 1995 Option Plan from 1,800,000 to
3,300,000 and to effect certain other changes;
3. To ratify the selection of KPMG LLP as the Company's independent certified
public accountants for the year ending December 31, 1999; and
4. To act upon such other matters as may properly come before the meeting.
The record date for the determination of stockholders entitled to vote at the
meeting is April 23, 1999, and only stockholders of record at the close of
business on that date will be entitled to vote at the meeting and any
adjournment thereof.
Whether or not you plan to attend the stockholders' meeting, please follow the
instructions on the enclosed proxy to ensure representation of your shares at
the meeting. You may revoke your proxy at any time prior to the time it is
voted.
Herndon, Virginia By Order of the Board of Directors,
April 29, 1999
/s/ VANCE FORT
VANCE FORT
Secretary
<PAGE>
WORLD AIRWAYS, INC.
The Hallmark Building
13873 Park Center Road
Herndon, Virginia 20171
PROXY STATEMENT
This proxy statement is being furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of World Airways, Inc. (the
"Company") for use at the Company's 1999 Annual Meeting of Stockholders, to be
held at 9:00 a.m., on Wednesday, June 9, 1999, and any adjournment thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders and described in detail herein. The meeting will be held at the
Company's headquarters located at 13873 Park Center Road, Suite 490, Herndon,
Virginia.
All properly executed proxies will be voted in accordance with the instructions
given thereby. If no choice is specified, proxies will be voted for the election
to the Board of Directors of the six persons named elsewhere in this proxy
statement; in favor of the amendment to the World Airways, Inc. 1995 Stock
Option Plan (the "1995 Option Plan") increasing the number of shares reserved
for issuance under the 1995 Option Plan; and in favor of the appointment of KPMG
LLP as the Company's independent certified public accountants. Any proxy may be
revoked by the person giving it at any time before it is exercised by giving
written notice to that effect to the Secretary of the Company or by signing a
later-dated proxy. Stockholders who attend the meeting may revoke any proxy
previously given and vote in person.
This proxy statement and the accompanying proxy card will be first mailed to the
stockholders on or about April 30, 1999. The cost of the solicitation will be
borne by the Company.
PURPOSE OF MEETING
At the meeting, the Board of Directors will ask stockholders (1) to elect four
Class I Directors to serve until the 2002 annual meeting of stockholders, and
two Class III Directors to serve until the 2001 annual meeting of stockholders,
and thereafter until their successors are duly elected and qualify, (2) to
ratify and approve an amendment to the 1995 Option Plan increasing the number of
shares of the Company's $.001 par value common stock (the "Common Stock")
reserved for issuance under the 1995 Option Plan from 1,800,000 to 3,300,000 and
effecting certain other changes, and (3) to ratify the selection of KPMG LLP as
independent certified public accountants for the Company for the year ending
December 31, 1999. In addition, the stockholders will act upon such other
matters as may properly come before the meeting.
There will also be an address by the Chairman of the Board of Directors,
President, and Chief Executive Officer of the Company and a general discussion
period during which stockholders will have an opportunity to ask questions about
the Company's business.
VOTING
Only holders of record of the Company's outstanding Common Stock, at the close
of business on April 23, 1999 (the "record date"), will be entitled to vote at
the meeting. On the record date, 7,102,872 shares of Common Stock were
outstanding and entitled to be voted.
Shares of Common Stock represented by proxies that are properly executed and
returned to the Company will be voted at the meeting in accordance with the
stockholders' instructions contained in such proxies. Where no such instructions
are given, proxy holders will vote such shares in accordance with the
recommendations of the Board of Directors. The proxy holders will also vote such
shares at their discretion with respect to such other matters as may properly
come before the meeting. The Company does not know of any matters to be acted
upon at the meeting other than the three matters described in this proxy
statement.
A quorum at the meeting will consist of the presence, in person or by proxy, of
the holders of a majority of the shares of Common Stock issued and outstanding
on the record date and entitled to vote at the meeting. Cumulative voting in the
election of Directors is not allowed. Each holder of shares of Common Stock
issued and outstanding on the record date shall be entitled to one vote for each
share owned by such holder (1) for the election of each of four Class I and two
Class III Directors, (2) on the amendment of the 1995 Option Plan, (3) on the
Board of Directors' selection of the Company's independent certified public
accountants for 1999, and (4) on each other matter to properly come before the
meeting. At the meeting, in accordance with the Company's charter documents and
Delaware law, the stockholders, by a plurality of the votes cast, shall elect
Class I and Class III Directors and, by a majority of the voting power of the
shares present and entitled to be voted, shall transact such other business as
shall be properly brought before them. Accordingly, the four Class I Director
nominees and the two Class III Director nominees receiving, in each case, the
greatest number of votes will be elected, abstentions will be disregarded in the
election of Directors and will be counted as "no" votes on each matter other
than the election of Directors, and broker non-votes will be disregarded and
will have no effect on the outcome of any vote.
THE COMPANY
The Company is a global provider of long-range wide-body passenger and cargo air
transportation outsourcing services under contracts to the United States Air
Force and to international airlines under fixed-rate contracts. It also leads a
contractor teaming arrangement that is a major supplier of commercial airlift
services to the United States Air Force Air Mobility Command.
SECURITY OWNERSHIP OF CERTAIN PERSONS
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of March 31, 1999, with respect
to each person who is known to the Company to be the beneficial owner of more
than five percent of the Company's Common Stock, $.001 par value per share, its
only class of voting securities:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY PERCENT OF CLASS
OWNED(1) OWNED(1)
- ------------------------ --------------------------------- ------------------- ----------------
<S> <C> <C> <C>
WorldCorp, Inc., 13873 Park Center Road, Suite 490 3,552,588 (2) 50.8%
Debtor in Possession Herndon, VA 20171
Putnam Investments, Inc., Putnam Attn: Frederick S. Marius, Esq. 1,598,096 (3) 22.8%
Investment Management, Inc., The One Post Office Square
Putnam Advisory Company, Inc., Boston, MA 02109
and Putnam Capital Appreciation
Fund
Naluri Berhad f/k/a Malaysian Wing On Center, 25th Floor 1,217,000 (4) 17.4%
Helicopter Services Berhad 1111 Connaught Road
("MHS") Central Hong Kong
AMVESCAP PLC 11 Devonshire Square 561,800 (5) 8.0%
London EC2M 4YR
England
</TABLE>
1 In setting forth this information, the Company has relied upon its
stock and convertible subordinated debenture transfer records and upon
Schedule 13D and Schedule 13G filings of, and other information
provided by, the persons listed. Beneficial ownership is reported in
accordance with Securities and Exchange Commission ("SEC") regulations
and therefore includes shares of the Company's Common Stock which may
be acquired within 60 days after March 31, 1999, upon the exercise of
outstanding stock options and warrants and the conversion of
outstanding convertible subordinated debentures. Shares of Common Stock
issuable upon the exercise of such options and warrants, and the
conversion of such debentures, are deemed outstanding for purposes of
computing the percentage of Common Stock owned by the beneficial owner
thereof listed in the table, but are not deemed outstanding for
purposes of computing the percentage of outstanding Common Stock owned
by any other stockholder. Except as otherwise stated below, all shares
are owned directly and of record, and each named person has sole voting
and investment power with regard to the shares shown as owned by such
person. For each shareholder, Percent of Class Owned is based on the
7,000,064 shares of Common Stock issued and outstanding on March 31,
1999 plus any shares which may be acquired by the shareholder within 60
days after March 31, 1999.
2 As reported in a Disclosure Statement with Respect to Plan of
Reorganization of WorldCorp, Inc. ("WorldCorp"), dated February 12,
1999, filed with the United States Bankruptcy Court for the District of
Delaware. As described in the Disclosure Statement, all of the shares
of Common Stock are held of record by WorldCorp Acquisition Corp.
("Acquisition") (subject, in the case of 350,000 of the shares, to the
senior lien of the Company), 80% of whose capital stock is owned by
WorldCorp, as debtor in possession, and secure the payment by WorldCorp
and Acquisition of certain obligations to the Company and to the former
shareholders of The Atlas Companies, Inc. ("Atlas"). Atlas is a wholly
owned subsidiary of Acquisition, acquired on April 20, 1998 for $16
million in Acquisition debt instruments and an earn-out during the five
years beginning September 1, 1997. Sun Paper Advisors, Inc. controlled
a majority stock interest in Atlas at the time of the acquisition.
WorldCorp, which filed for Chapter 11 protection on February 12, 1999,
is continuing to manage its business and properties as debtor in
possession.
3 As reported in a Schedule 13G filed with the SEC on February 9, 1999,
jointly by (i) Putnam Investments, Inc., (ii) Marsh & McLennan
Companies, Inc., (iii) Putnam Investment Management, Inc., (iv) The
Putnam Advisory Company, Inc. and (v) Putnam Capital Appreciation Fund.
Putnam Investments, Inc. and Marsh & McLennan Companies, Inc. disclaim
beneficial ownership with respect to the shares, which may be acquired
upon the conversion of convertible subordinated debentures held of
record by their subsidiaries.
4 As reported in a Schedule 13D dated October 12, 1995, filed with the
SEC by MHS, as reduced by 773,000 shares of Common Stock sold by MHS to
the Company on January 23, 1998.
5 As reported in a Schedule 13G filed with the SEC on February 10,
1999, jointly by (i) AMVESCAP PLC, (ii) AMVESCAP PLC \GA\, (iii) AVZ,
Inc., (vi) AIM Management Group Inc., (v) AMVESCAP Group Services,
Inc., (vi) INVESCO, Inc., (vii) INVESCO North American Holdings, Inc.,
(ix) INVESCO Funds Group, Inc., (x) INVESCO Management & Research,
Inc., (xi) INVESCO Realty Advisors, Inc., (xii) INVESCO Capital
Management, Inc., and (xiii) INVESCO (NY) Asset Management Limited.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information, as of March 31, 1999, with respect
to the beneficial ownership of the Company's Common Stock, $.001 par value per
share, its only class of voting securities, by (a) each Director and nominee for
Director of the Company; (b) each individual serving as chief executive officer
of the Company during 1998; (c) each of the four other most highly compensated
executive officers of the Company at December 31, 1998; and (d) all Directors
and executive officers of the Company as a group:
SHARES PERCENT OF
BENEFICIALLY CLASS
NAME OF BENEFICIAL OWNER CAPACITY OWNED (1) OWNED(1)
------------------------ ------------------ ------------ ----------
Russell L. Ray, Jr. Director and Chief 120,893(2) 1.7%
Executive Officer
Daniel J. Altobello Director and Nominee 3,878(3) *
for Director
A. Scott Andrews Director 11,656(4) *
John C. Backus, Jr. Director 6,371(5) *
Mark M. Feldman Director and Nominee 554(6) *
for Director
Gen. Ronald R. Fogleman Director 3,878(3) *
Hollis L. Harris Nominee for Director --- *
Rodger R. Krouse Director 554(6) *
Lim Kheng Yew Director 11,656(4) *
Wan Malek Ibrahim Director 11,656(4) *
Wilbur L. Ross, Jr. Director 554(6) *
Peter M. Sontag Director and Nominee 23,256(7) *
for Director
James Douglas Executive Officer 30,000(8) *
Vance Fort Executive Officer 47,957(9) *
Ahmad M. Khatib Executive Officer 31,905(10) 1.2%
William R. Lange Executive Officer 24,735(11) *
Directors and Executive 405,949(12) 5.5%
Officers as a Group
(18 persons)
* Individual is the beneficial owner of less than one percent (1%) of
the Company's outstanding Common Stock.
1 In setting forth this information, the Company has relied upon its
stock and convertible subordinated debenture transfer records and upon
Schedule 13D and Schedule 13G filings of, and other information
provided by, the persons listed. Beneficial ownership is reported in
accordance with SEC regulations and includes shares of Common Stock
which may be acquired within 60 days after March 31, 1999, upon the
exercise of outstanding stock options and warrants and the conversion
of outstanding convertible subordinated debentures. Shares of Common
Stock issuable upon the exercise of such options and warrants, and the
conversion of such debentures, are deemed outstanding for purposes of
computing the percentage of outstanding Common Stock owned by the
beneficial owner thereof listed in the table, but are not deemed
outstanding for purposes of computing the percentage of outstanding
Common Stock owned by any other stockholder. Except as otherwise stated
below, all shares are owned directly and of record, and each named
person has sole voting and dispositive power with regard to the shares
shown as owned by such person. For each shareholder, Percent of Class
Owned is based on the 7,000,064 shares of Common Stock issued and
outstanding on March 31, 1999 plus any shares which may be acquired by
the shareholder within 60 days after March 31, 1999.
2 Consists of (i) 5,000 shares of Common Stock owned directly by Mr. Ray,
(ii) 110,000 shares of Common Stock issuable to Mr. Ray upon the
exercise of options granted, and (iii) 5,893 shares of Common Stock
allocated to Mr. Ray's Company 401(k) Plan account.
3 Consists of 4,155 shares of Common Stock issuable to each of Mr.
Altobello and Gen. Fogleman upon the exercise of options granted.
4 Consists of 11,656 shares of Common Stock issuable to each of Messrs.
Andrews, Lim, and Malek upon the exercise of options granted.
5 Consists of 6,371 shares of Common Stock issuable to Mr. Backus upon
the exercise of options granted.
6 Consists of 554 shares of Common Stock issuable to each of Messrs.
Feldman, Krouse and Ross upon the exercise of options granted.
7 Consists of (i) 11,600 shares of Common Stock owned directly by Mr.
Sontag and (ii) 11,656 shares of Common Stock issuable to Mr. Sontag
upon the exercise of options granted.
8 Consists of (i) 30,000 shares of Common Stock issuable to Mr. Douglas
upon the exercise of options granted. Mr. Douglas resigned on March 25,
1999.
9 Consists of (i) 43,750 shares of Common Stock issuable to Mr. Fort upon
the exercise of options granted and (ii) 4,207 shares of Common Stock
allocated to Mr. Fort's Company 401(k) Plan account.
10 Consists of (i) 80,000 shares of Common Stock issuable to Mr. Khatib
upon the exercise of options granted (including an option granted by
WorldCorp for 50,000 shares whcih it owns) and (ii) 1,905 shares of
Common Stock allocated to Mr. Khatib's Company 401(k) Plan account.
11 Consists of (i) 20,000 shares of Common Stock issuable to Mr. Lange
upon the exercise of options granted and (ii) 4,735 shares of Common
Stock allocated to Mr. Lange's Company 401(k) Plan account.
12 Consists of (i) 16,600 shares of Common Stock owned directly by
Directors and executive officers as a group, (ii) 398,163 shares of
Common Stock issuable to Directors and executive officers as a group
upon the exercise of options granted, and (iii) 16,740 shares of Common
Stock allocated to the Company 401(k) Plan accounts of Directors and
executive officers as a group.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act") requires
the Company's Directors and officers, and persons who own more than 10% of its
Common Stock, to file with the SEC initial reports of ownership of the Company's
equity securities and to file subsequent reports when there are changes in such
ownership. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company, all such persons timely complied with
their Section 16(a) filing requirements during and with respect to the Company's
1998 fiscal year, except that each of the following present or former Directors
filed one late Form 5 annual report reflecting either (a) one grant of options
exempted from the provisions of Section 16(b) of the 1934 Act or (b) the
cancellation or modification of a previous grant of such options: T. Coleman
Andrews, III, A. Scott Andrews, Ahmad M. Khatib, Lim Kheng Yew, Wan Malek
Ibrahim, and Peter M. Sontag.
BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing broad
corporate policies and for the overall performance of the Company. It has
established standing Executive, Audit, and Compensation Committees. There is no
standing nominating or similar committee. During 1998, there were five meetings
of the Board of Directors of the Company, two meetings of the Executive
Committee, two meetings of the Audit Committee, and two meetings of the
Compensation Committee. During 1998, or the portion of 1998 during which each
Director served, each Director except Lim Kheng Yew and Wan Malek Ibrahim
attended at least 75% of the aggregate of (1) the total number of meetings of
the Board of Directors and (2) the total number of meetings of all Committees of
the Board on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive Committee may exercise all of the Board's power and authority when
the Board is unable to meet, except that certain fundamental responsibilities,
such as the declaration of dividends, are reserved to the Board. The members of
the Executive Committee are Daniel J. Altobello (Chairman), John C. Backus, Jr.,
Wan Malek Ibrahim, and Russell L. Ray, Jr. (In March 1999, the Board established
a Strategic Planning Subcommittee of the Executive Committee to evaluate
long-term planning options for the Company. The members of the Strategic
Planning Subcommittee are Daniel J. Altobello (Chairman), A. Scott Andrews, John
C. Backus, Jr., Mark M. Feldman, Russell L. Ray, Jr., and Wilbur L. Ross, Jr.)
The Audit Committee recommends to the Board the firm to be selected each year as
independent certified public accountants to the Company and auditors of the
Company's financial statements. The Audit Committee also has responsibility for
(i) reviewing the scope and results of the audit with the independent auditors,
(ii) reviewing the Company's financial condition and results of operations with
management and the independent auditors, (iii) considering the adequacy of the
internal accounting and control procedures and year 2000 compliance of the
Company, and (iv) reviewing any non-audit services and special engagements to be
performed by the independent auditors. The Audit Committee also reviews, at
least once each year, the terms of all material transactions and arrangements
between the Company and its affiliates. The members of the Audit Committee are
A. Scott Andrews (Chairman), Rodger R.
Krouse, and Lim Kheng Yew.
The Compensation Committee reviews key employee compensation policies, plans,
and programs; monitors performance and compensation of Company officers and
other key employees; prepares recommendations and periodic reports to the Board
concerning such matters; and administers the Company's various compensation
plans. The members of the Compensation Committee are Peter M.
Sontag (Chairman) and Gen. Ronald R. Fogleman.
COMPENSATION OF MEMBERS OF THE BOARD AND COMMITTEES
Directors who are not also executive officers of the Company or of an affiliate
of the Company ("Non-Affiliate Directors") receive $25,000 annually for serving
on the Board of the Company, which amount is paid quarterly in advance. Chairmen
of Board Committees also receive compensation in the amount of $5,000 per year
for such service as Committee Chair. Non-Affiliate Directors are reimbursed for
usual and ordinary expenses of meeting attendance. The Company has adopted a
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), pursuant to
which each new Non-Affiliate Director, upon election or appointment to the Board
of Directors of the Company, is granted options to purchase 10,000 shares of
Common Stock. On the third anniversary of the initial award, each such Director
will be granted an option to purchase an additional 5,000 shares of Common
Stock. Options granted under the Directors' Plan become exercisable in equal
monthly installments during the 36 months following the award, as long as the
person remains a Director of the Company. The exercise price of all such options
is the average closing price of the Common Stock during the 30 trading days
immediately preceding the date of grant. Up to 250,000 shares of Common Stock
may be issued under the Directors' Plan, subject to certain adjustments.
MATTER NO. 1 - ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Members of each
class serve staggered terms. At the meeting for which proxies are being
solicited, four Class I Directors will be elected to serve until the 2002 Annual
Meeting of Stockholders, and two Class III Directors will be elected to serve
until the 2001 Annual Meeting of Stockholders, and thereafter until their
successors are duly elected and qualify. All other Directors will continue in
office after the meeting. Unless otherwise directed by the persons giving
proxies, the proxy holders intend to vote all shares for which they hold proxies
for the nominees set forth below. Although it is not contemplated that any
nominee will decline or be unable to serve, if either occurs prior to the
meeting, the Board will select a substitute nominee.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
TERMS OF OFFICE EXPIRING AT THE 2002 ANNUAL MEETING
NAME AND AGE BUSINESS EXPERIENCE
------------ ----------------------------
Daniel J. Altobello, 58
Mr. Altobello has been a Director of the Company since March
1998. Since September 1995, he has been chairman of the
board of directors of Onex Food Services, Inc., parent of
LSG/SKY Chefs and Caterair International, Inc. Onex is the
largest airline-catering company in the world. Previously he
was chairman of the board of directors, president, and chief
executive officer of Caterair International Corporation and
Caterair Holdings Corporation; executive vice president of
Marriott Corporation and president of Marriott Airport
Operations Group; and vice president, administration
services, of Georgetown University. Mr. Altobello is a
director of Sodexho Marriott Services, Inc., American
Management Systems, Inc., Colorado Prime Corporation, and
Mesa Air Group, Inc., reporting companies under the
Securities Exchange Act of 1934, and of several privately
held companies.
Mark M. Feldman, 48
Mr. Feldman has been a Director of the Company since March
1999, when the creditors of WorldCorp requested that he be
one of three WorldCorp representatives to serve on the Board
of Directors. Since February 1999, he has been executive
vice president and chief restructuring officer of WorldCorp,
an affiliate of the Company, and since 1993, he has been
president and chief executive officer of Cold Spring Group,
Inc., a reorganization and restructuring consulting firm,
which WorldCorp had engaged previously, and an independent
case and litigation management consultant. Mr. Feldman is a
director of SNL Securities, Inc., a publisher of data bases
and manager of a bank and thrift portfolio, he is a trustee
of Baron Asset Fund, a registered investment company. Mr.
Feldman was formerly a trustee of Aerospace Creditors
Liquidating Trust, a trust that was formed in the
reorganization of LTV Corp. Mr. Feldman has advised the
Company that he presently does not intend to continue as a
director of the Company following any confirmation of a plan
of reorganization for WorldCorp.
Hollis L. Harris, 67
Mr. Harris has been appointed to fill a vacancy on the Board
of Directors, and named to succeed Russell L. Ray, Jr. as
Chairman of the Board of Directors, President, and Chief
Executive Officer, effective May 1, 1999. Since March 1997,
he has founded two airline transportation companies. From
January 1993 to August 1996, he was chairman, president, and
chief executive officer of Air Canada, a major international
carrier. Previously he was vice chairman, president, and
chief executive officer of Air Canada; chairman and chief
executive officer of Air Eagle Holdings, an aviation
consulting firm; chairman, president, and chief executive
officer of Continental Airlines; and president and chief
operating officer of Delta Airlines. Mr. Harris is a
director of American Business Products, Inc., a reporting
company under the Securities Exchange Act of 1934.
Peter M. Sontag, 56
Mr. Sontag has been a Director of the Company since February
1994. Since May 1997, he has been chairman of the board of
directors of Travel Industries, Inc. d/b/a THOR, Inc., which
provides marketing, management, and automated operational
services to 11,000 associated travel agencies. Previously he
supplied strategic, travel, and automation consulting
services to various national and international clients;
founded, and was chairman of the board of directors and
chief executive officer of, USTravel, Inc., the third
largest travel distribution company in the United States;
and was chief executive officer of Sontag, Annis &
Associates, Inc., a travel and computer consulting firm.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
TERMS OF OFFICE EXPIRING AT THE 2001 ANNUAL MEETING
NAME AND AGE BUSINESS EXPERIENCE
- ------------- ------------------------
Wilbur L. Ross, Jr., 61
Mr. Ross has been a Director of the Company since March
1999, when the creditors of WorldCorp requested that he be
one of three WorldCorp representatives to serve on the Board
of Directors. Since August 1976, he has been senior managing
director of Rothschild, Inc., an investment firm, and since
1997, he has been managing member of the general partner of
Rothschild Recovery Fund L.P., which asserts it is a
principal creditor of WorldCorp. Mr. Ross has been involved
in the structuring of numerous bankruptcy and reorganization
plans. He is a director of Mego Financial Corp., Syms Corp.,
and KTI Inc., and a director and chief executive officer of
News Communications, Inc., a neighborhood newspaper
publisher, all reporting companies under the Securities
Exchange Act of 1934.
Rodger R. Krouse, 37
Mr. Krouse has been a Director of the Company since March
1999, when the creditors of WorldCorp requested that he be
one of three WorldCorp representatives to serve on the Board
of Directors. Since May 1995, he has been managing director
of Sun Capital Partners, Inc., an investment firm, and from
1984 to 1995 he was employed by Lehman Brothers, Inc., most
recently as senior vice president. He is a director of
Labtec Inc., f/k/a Spacetec IMC Corporation, a reporting
company under the Securities Exchange Act of 1934.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE WITH AUTHORITY FOR THE PROXY HOLDERS
TO VOTE FOR THE NOMINEES NAMED ABOVE OR THEIR SUBSTITUTES AS SET FORTH HEREIN.
MATTER NO. 2 - RATIFICATION OF AMENDMENT TO
WORLD AIRWAYS, INC. 1995 STOCK OPTION PLAN
The Board of Directors has adopted, approved, and recommended to the
shareholders for ratification and approval an amendment to the 1995 Option Plan
designed (a) to increase the number of shares of Common Stock available for
issuance under the 1995 Option Plan from 1,800,000 to 3,300,000, (b) to fix the
exercise price for options covering the additional 1,500,000 shares at fair
market value of the underlying Common Stock on the date of grant, and (c) to
provide that options covering the additional 1,500,000 shares shall vest and
become exercisable on the date of grant for 10% of the underlying shares, one
year after the date of grant for an additional 30% of the underlying shares, two
years after the date of grant for an additional 30% of the underlying shares,
and three years after the date of grant for the remaining 30% of the underlying
shares. The 1995 Option Plan is designed to help the Company attract and retain
key management-level employees and to reward the Company's employees for results
that contribute to strong earnings performance and improved share values.
Options covering the additional 1,500,000 shares are specifically intended to
help the Company attract and retain experienced managers.
Except as otherwise provided in the proposed amendment, (i) the 1995 Option Plan
permits the grant of both qualified incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended, and nonqualified
stock options; (ii) the exercise price for incentive stock options may not be
less than the fair market value of the underlying Common Stock on the date of
grant; and (iii) the exercise price for incentive stock options may not be less
than 85% of the fair market value of the underlying Common Stock on the date of
grant. The 1995 Option Plan is administered by the Compensation Committee of the
Board of Directors, which has the authority to select the persons to participate
in it and, except as otherwise limited by the 1995 Option Plan, to determine the
terms of all awards made under it. Accordingly, the option benefits or amounts
which may be received in the future, or would have been received in the
Company's last fiscal year, by any person under the 1995 Option Plan, as
proposed to be amended, are not presently determinable.
Directors and employees of, and consultants to, the Company and its affiliates
are eligible to participate. The Company has eleven directors, approximately 800
employees, and approximately two consultants. Options are granted without any
cash consideration being paid to the Company. Historically, the Compensation
Committee has awarded options to Company executives which permit accelerated
vesting based on share price appreciation, and to other employees with vesting
in equal monthly installments over three years from the date of grant.
The 1995 Option Plan provides generally that, without a vote of security
holders, the Board of Directors of the Company may amend it with the approval of
WorldCorp if WorldCorp is the controlling shareholder of the Company at the time
of the amendment. It is possible that such an amendment could increase the cost
of the 1995 Option Plan to the Company or alter the allocation of benefits among
participants. However, for the forseeable future, the Board of Directors intends
to submit amendments to the holders of its Common Stock for ratification and
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
MATTER NO. 3 - RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP to serve as the Company's
independent certified public accountants and auditor for the year ending
December 31, 1999. At the meeting for which proxies are being solicited, the
Company will ask stockholders to ratify the Board's selection. KPMG LLP, which
served in the same capacity in 1998, is expected to be represented at the
meeting. A representative of KPMG LLP will have an opportunity to make a
statement if the representative so desires and will be available to respond to
appropriate questions.
If the stockholders do not ratify the Board's selection, the Board of Directors
will reconsider its action with respect to the appointment. Approval of the
resolution, however, will in no way limit the Board's authority to terminate or
otherwise change the engagement of KPMG LLP during the year ending December 31,
1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
CONTINUING DIRECTORS
The following persons will continue as Directors of the Company following the
meeting:
CLASS II DIRECTORS
TERMS OF OFFICE EXPIRING AT THE 2000 ANNUAL MEETING
NAME AND AGE BUSINESS EXPERIENCE
- ------------ -------------------------
Gen. Ronald R. Fogleman, 57
Gen. Fogleman has been a Director of the Company since March
1998. He retired from the United States Air Force on
September 1, 1997 after 38 years of service. On his final
tour of duty, he served as Chief of Staff of the Air Force,
a member of the Joint Chiefs of Staff, and military advisor
to the Secretary of Defense, the National Security Council,
and the President. He is a director of Mesa Air Group, Inc.,
a reporting company under the Securities Exchange Act of
1934, a trustee of Mitre Corporation, and a director of
several other privately held airline and defense industry
companies.
John C. Backus, Jr., 40
Mr. Backus has been a Director of the Company since June
1997. Since 1998, he has been managing partner of Draper
Atlantic Venture Fund, a venture capital firm. From 1990 to
August 1998, he held management positions with InteliData
Technologies Corp., most recently as president, chief
executive officer and a director.
Russell L. Ray, Jr., 63
Mr. Ray has been a Director of the Company since July 1993,
President and Chief Executive Officer since April 1997, and
Chairman of the Board of Directors since June 1998. From
March 1996 to April 1997, he was an aviation and aerospace
consultant. Previously he was executive vice president of
British Aerospace, Inc.; president and chief executive
officer of Pan American World Airways; vice president and
general manager of commercial marketing of McDonnell Douglas
Corporation; president of Pacific Southwest Airlines; and
senior vice president of Eastern Airlines.
Lim Kheng Yew, 46
Mr. Lim has been a Director of the Company since February
1994. For more than five years, he has been executive
chairman of KYM Holdings Berhad, an industrial paper
manufacturer, and a director of Naluri Berhad f/k/a
Malaysian Helicopter Services Berhad ("MHS"), an affiliate
of the Company, and of Technology Resources Industries
Berhad, Malaysian investment firms. A February 1994
shareholders agreement among the Company, WorldCorp, and MHS
obligates WorldCorp to vote its shares to elect two Director
nominees designated by MHS. Mr. Lim is one of those
designees.
CLASS III DIRECTORS
TERMS OF OFFICE EXPIRING AT THE 2001 ANNUAL MEETING
NAME AND AGE BUSINESS EXPERIENCE
- ------------ ------------------------
A. Scott Andrews, 40
Mr. Andrews has been a Director of the Company since June
1992. Since May 1994, he has been managing director of
Winston Partners, an investment firm, and a director of
several privately held companies.
Wan Malek Ibrahim, 51
Mr. Malek has been a Director of the Company since February
1994. For more than five years, he has been managing
director and a member of the board of directors of Malaysian
Airlines, an affiliate of the Company. He is also a director
of MHS, an affiliate of the Company, and of KYM Holdings
Berhad, an industrial paper manufacturer. A February 1994
shareholders agreement among the Company, WorldCorp, and MHS
obligates WorldCorp to vote its shares to elect two Director
nominees designated by MHS. Mr. Malek is one of those
designees.
CERTAIN TRANSACTIONS
On January 8, 1998, in accordance with a February 1994 shareholders agreement,
the Company purchased 773,000 shares of its Common Stock from MHS, an affiliate
of the Company, for cash of approximately $5.9 million, then the fair market
value. At December 31, 1998, MHS owned approximately 28% of the outstanding
voting stock of Malaysian Airlines, the Company's second-largest customer. In
1998 the Company provided approximately $50.3 million in transportation services
to Malaysian Airlines, which had an account debt to the Company of approximately
$3.1 million at year-end. Wan Malek Ibrahim and Lim Kheng Yew, Directors of the
Company, are directors of Malaysian Airlines and/or MHS.
The Company is a second-tier subsidiary of WorldCorp, a highly leveraged
publicly held company. WorldCorp owns 80% of the stock of WorldCorp Acquisition
Corp. ("Acquisition"), which owns 50.8% of the Company's Common Stock. On
February 12, 1999, unable to pay its debts, WorldCorp petitioned in
reorganization, under Chapter 11 of the United States Bankruptcy Code, in the
United States Bankruptcy Court for the District of Delaware, Case No. 99-298
(MFW). Its petition reflected approximately $22 million in assets and $115
million in liabilities, and described its principal creditors as including
Rothschild Recovery Fund L.P. and a group represented by Sun Paper Advisors,
Inc. Wilbur L. Ross, Jr. and Rodger R. Krouse, Directors of the Company since
March 15, 1999, are affiliates of Rothschild Recovery Fund L.P. and Sun Paper
Advisors, Inc., respectively. T. Coleman Andrews, III, in June 1998, resigned as
Chairman of the Board of Directors of the Company and chairman of the board of
directors of WorldCorp, and was subsequently replaced at WorldCorp by a
management group that includes Mark M. Feldman, Director of the Company since
March 1999. WorldCorp's filing for reorganization may be deemed to constitute a
change in control of the Company, solely within the meaning of Securities and
Exchange Commission Rule 405, insofar as the power to direct or cause the
direction of the Company's management and policies may be deemed to be shared
with WorldCorp's creditors and other parties in interest in the reorganization.
The Company, which is not in bankruptcy or reorganization, is a secured and
general unsecured creditor of WorldCorp in the proceeding.
On February 21, 1998 and April 8, 1998, at the request of WorldCorp, the Company
loaned WorldCorp a total of $2 million, secured by one million shares of the
Company's Common Stock, for the payment of certain debts. WorldCorp failed to
repay the loan when it came due on April 28, 1998. Thereafter the Company and
WorldCorp restructured the loan, increasing the interest rate to 12% and
substituting 1,860,396 shares of the common stock of InteliData Technologies
Corp. ("InteliData"), a publicly-held 28%-owned subsidiary of WorldCorp and an
affiliate of the Company, and 500,000 shares of the Company's Common Stock for
the collateral previously held. On June 25, 1998, the Company purchased 150,000
of the pledged shares of its Common Stock for a credit to the loan balance of
approximately $682,500, or $4.55 per share, then the fair market value. On
August 25, 1998, the Company sold 245,000 of the pledged shares of InteliData
common stock and applied the $222,031 net proceeds of sale, or $.90625 per
share, to the loan balance. On February 12, 1999, when WorldCorp petitioned in
reorganization, the principal, interest, and expenses owing on the loan,
according to the Company's records, totaled approximately $1,364,157, fully
secured by 350,000 shares of the Company's Common Stock and 1,615,396 shares of
InteliData common stock. The Company is precluded from further sales of the
collateral absent an order of the Bankruptcy Court.
On April 20, 1998, Acquisition acquired The Atlas Companies, Inc. ("Atlas") for
$16 million in Acquisition debt instruments and an earn-out. In connection with
the transaction, WorldCorp pledged all of its shares of common stock in
Acquisition and InteliData, and Acquisition pledged all of its shares of common
stock in the Company (subject, in the case of 350,000 shares, to the Company's
senior lien) and Atlas, to the former shareholders of Atlas to secure the debt
instruments and earn-out. Under the plan of reorganization proposed February 12,
1999 by WorldCorp, as subsequently amended (the "Plan"), the Company's senior
lien on the 350,000 shares would be discharged by payment in full of the secured
obligation owing by WorldCorp to the Company, and the former shareholders of
Atlas and the holders of WorldCorp's outstanding debentures and general
unsecured claims, principally Rothschild Recovery Fund L.P., would receive
warrants entitling them to acquire up to all of WorldCorp's ownership interest
in Acquisition, and hence all of Acquisition's interest in the Company, for
payments totaling at least 125% of the appraised fair market value of
Acquisition shares acquired as of the effective date of the Plan. Although the
Plan has been negotiated with WorldCorp's principal creditors, no assurance can
be given that it will be confirmed or performed.
In addition, WorldCorp has outstanding general unsecured debt which includes an
unsecured claim of the Company in the amount of $429,421 at December 31, 1998,
consisting of intercompany charges and advances to WorldCorp.
STOCK PERFORMANCE
The Company completed an initial public offering of its Common Stock on October
5, 1995, and the Common Stock is traded on the NASDAQ SmallCap Market. The graph
below compares the performance, since October 5, 1995, of an investment in the
Common Stock and the Russell 2000 Index, the Dow Jones Airlines Index, and the
Dow Jones Air Freight/Couriers Index. The comparison assumes that the value of
the investment and of each index was $100 at October 5, 1995 and that all
dividends were reinvested.
There are significant differences between the business of the Company and those
of the companies which comprise the abovementioned industry or line-of-business
indices. These differences may lessen the comparability of the information
presented. The Dow Jones Airlines Index components are large, scheduled,
domestic airline carriers, while the Company is a smaller global airline and
contract service provider with no scheduled service. The Dow Jones Air
Freight/Couriers Index is heavily weighted by the market capitalization of
freight and courier companies which have operations much larger than the
Company's cargo operations.
VALUE OF INITIAL INVESTMENT OF $100
World Russell DJ Airlines DJ Air
Airways 2000 Airlines Freight/
Index Index Couriers
Index
-------- -------- ----------- ----------
10/5/95 100 100 100 100
12/31/95 90 105 104 97
12/31/96 65 123 120 114
12/31/97 55 150 190 155
12/31/98 8 146.24 167.07 205.97
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation awarded
to, earned by, or paid to the individual serving as chief executive officer of
the Company during 1998 and to each of the four most highly compensated other
executive officers of the Company at December 31, 1998 (collectively, the "named
executive officers") for services rendered to the Company during the years ended
December 31, 1998, 1997, and 1996:
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS
----------------
NAME AND ANNUAL COMPENSATION SHARES OF COMMON
PRINCIPAL --------------------------- STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------- ---- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Russell L. Ray, Jr., 1998 $363,462 --- --- $11,137 (1)
President and 1997 $270,085 $27,009 250,000 $5,798
Chief Executive 1996 --- --- --- ---
Officer
Ahmad M. Khatib, 1998 $207,692 --- --- $2,724 (2)
Executive Vice 1997 $200,000 $30,102 --- $10,718
President 1996 $191,519 $30,000 --- $4,060
Vance Fort, 1998 $195,058 --- --- $3,629 (3)
Executive 1997 $170,000 $25,587 --- $9,094
Vice President 1996 $166,363 $25,500 --- $6,466
James Douglas, 1998 $207,692 --- --- $650 (4)
Executive Vice 1997 $7,692 $2,557 150,000 ---
President 1996 --- --- --- ---
William R. Lange, 1998 $186,115 --- --- $8,775 (5)
Executive Vice 1997 $83,692 $12,216 100,000 $270
President 1996 --- --- --- ---
</TABLE>
1 Consists of $1,137 in excess term life insurance premiums and $10,000
in annual Company contributions to a defined contribution plan paid on
behalf of Mr. Ray.
2 Consists of $650 in excess term life insurance premiums and $2,074 in
annual Company contributions to a defined contribution plan paid on
behalf of Mr. Khatib.
3 Consists of $552 in excess term life insurance premiums and $3,077 in
annual Company contributions to a defined contribution plan paid on
behalf of Mr. Fort.
4 Consists of $650 in excess term life insurance paid on behalf of Mr.
Douglas. Mr. Douglas resigned on March 25, 1999.
5 Consists of $650 in excess term life insurance premiums and $8,125 in
annual Company contributions to a defined contribution plan paid on
behalf of Mr. Lange.
No Company stock options were granted to, or exercised by, any of the named
executive officers in the fiscal year ended December 31, 1998, and at fiscal
year-end all of their unexercised options had no value. The following table sets
forth additional information concerning their unexercised options:
FISCAL YEAR-END OPTION VALUES
SHARES OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998:
NAME (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
- ----------------- ---------------------------- -------------------------
Russell L. Ray, Jr. 110,000/150,000 ---/---
Ahmad M. Khatib 30,000/120,000 ---/---
Vance Fort 43,750/81,250 ---/---
James Douglas 30,000/120,000* ---/---
William R. Lange 20,000/80,000 ---/---
* Expired upon his resignation on March 25, 1999. The exercisable options will
expire March 25, 2000.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of the named
executive officers. The agreement with Russell L. Ray, Jr. provides that he
shall serve as Chairman of the Board of Directors, President, and Chief
Executive Officer of the Company until September 30, 2000 at a base salary of
$350,000 per year, annual bonuses of up to 75% of his base salary, the grant of
options to purchase up to 250,000 shares of Common Stock, and entitlement to all
employee benefits made available to other officers of the Company.
The agreement with Ahmad M. Khatib provides that he shall serve as Executive
Vice President of the Company until December 31, 1999 for a base salary of
$200,000 per year, annual bonuses under the Company's management incentive
compensation plan (the "Management Incentive Plan") described below, and
entitlement to participate in all employee benefit plans made available to other
senior executives of the Company and certain other benefits, including a $1
million life insurance policy.
The agreement with Vance Fort amended in 1999, provides that he shall serve as
Executive Vice President of the Company until December 31, 2000 for a base
salary of $200,000 per year, annual bonuses under the Management Incentive Plan,
and entitlement to participate in all employee benefit plans made available to
other senior executives of the Company.
The agreement with James Douglas provides that he shall serve as chief operating
officer of the Company until November 30, 2000 for a base salary of $220,000 per
year, annual bonuses under the Management Incentive Plan, and entitlement to
participate in all employee benefit plans made available to other senior
executives of the Company.
The agreement with William R. Lange provides that he shall serve as Executive
Vice President of the Company until June 8, 1999 for a minimum salary of
$170,000 per year, annual bonuses under the Management Incentive Plan, and
entitlement to participate in all employee benefit plans made available to other
senior executives of the Company.
Each agreement is terminable by the Company with or without cause and by the
executive officer upon the occurrence of certain events, including a change in
control of the Company. Upon any such termination other than for cause, the
executive officer would be entitled to receive the unpaid portion of his base
salary through the end of the contract term, any bonus payable, and certain
other compensation, and all or a portion of the options previously granted would
become immediately exercisable.
T. Coleman Andrews, III resigned, on June 17, 1998, as Chairman of the Board of
Directors of the Company, and as a Director, without any compensation on
termination becoming payable to him under his employment agreement, except that
the Board of Directors agreed that options for the Company's Common Stock
previously granted to Mr. Andrews should be eligible to vest until June 16, 1999
and, to the extent vested, be exercisable until June 16, 2000. James Douglas
resigned, on March 25, 1999, as an executive officer of the Company without any
compensation on termination becoming payable to him under his employment
agreement. Russell L. Ray, Jr. will resign, effective May 1, 1999, as Chairman
of the Board of Directors, President, and Chief Executive Officer of the Company
without any compensation on termination becoming payable to him under his
employment agreement. He will remain a non-employee Director. On April 4, 1999,
the Company announced that Hollis L. Harris will succeed Mr. Ray as Chairman of
the Board of Directors, President, and Chief Executive Officer effective May 1,
1999.
COMPENSATION COMMITTEE REPORT
There are four main compensation components for executive officers of the
Company: (1) base salary; (2) bonuses paid under the Company's Management
Incentive Plan; (3) incentive stock options granted under the Company's 1995
stock option plan (the "1995 Option Plan"); and (4) accruals of possible
payments under the Company's key employee retention plan ("KERP").
Base salaries of executive officers are initially set, and from time to time
adjusted, to be competitive with those being paid by other area and industry
companies to attract executives with comparable responsibilities and experience.
The Compensation Committee of the Board of Directors normally recommends, and
the Board determines, the base salary of each executive officer of the company.
Under the Management Incentive Plan, executive officers who are not covered by
sales commission or collective bargaining agreements are eligible to receive
annual cash bonuses of 30%-40% of their base salaries, subject to adjustment.
Any bonus payable to the President and Chief Executive Officer is based solely
on whether the Company meets or exceeds certain budgeted net income targets. Any
bonus payable to other executive officers is based on a weighting of Company,
department, and individual quantitative performance, subject to adjustment.
Under the 1995 Option Plan, executive officers are eligible to receive grants of
qualified incentive stock options exercisable over not more than ten years at
the fair market value of the Company's Common Stock on the date of grant. The
1995 Option Plan is administered by the Compensation Committee, which is
authorized to determine the vesting schedule for each grant.
Under the KERP, in order to ensure the continued performance of certain key
functions, the Company is accruing retention payments which are payable to
certain management employees in the event that they remain continuously employed
by the Company during the 24 months following their selection for participation.
Alternatively, participating employees are eligible to receive severance
payments in the event they are terminated under certain circumstances within 24
months after a change in control of the Company. The KERP is administered by the
Compensation Committee, which is authorized to establish retention payments of
up to 100%, and (subject to the provisions of any employment agreement)
severance payments of up to 150%, of the employee's annual salary. The named
executive officers are eligible to be selected for participation.
The base salary of each of the named executive officers was established prior to
the start of the Company's 1998 fiscal year, except that in March 1998, based on
the recommendation of the Compensation Committee, the Chief Executive Officer
increased the base salary of Vance Fort, Executive Vice President, General
Counsel, and Secretary of the Company, from $170,000 to $185,000 annually, an
amount deemed more consistent with his position. No bonuses, options, retention
payments, or severance payments were awarded or paid to, earned by, or accrued
with respect to any of the named executive officers for their services in the
year ending December 31, 1998.
The foregoing report is provided by the Compensation Committee of the Board of
Directors, consisting of Peter M. Sontag and Gen. Ronald R. Fogleman,
non-employee Directors of the Company.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2000 Annual Meeting of
Stockholders must be received by the Company's Secretary no later than December
1, 1999, to be included in the Company's 2000 proxy materials.
Proposals intended for inclusion in next year's proxy statement should be sent
to Vance Fort, Executive Vice President, General Counsel, and Secretary, World
Airways, Inc., The Hallmark Building, 13873 Park Center Road, Suite 490,
Herndon, Virginia 20171.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders which includes a copy of
the Company's Form 10-K Annual Report is being mailed to each stockholder
entitled to vote at the 1999 Annual Meeting of Stockholders. For a copy of the
Annual Report write to Gilberto M. Duarte, Chief Financial Officer, World
Airways, Inc., The Hallmark Building, 13873 Park Center Road, Suite 490,
Herndon, Virginia 20171.
OTHER INFORMATION
This solicitation of proxies is being made by the Board of Directors of the
Company. In addition to solicitation by mail, proxies may also be solicited by
Directors, officers, and employees of the Company, who will not receive
additional compensation for such solicitation. Brokerage firms and other
custodians, nominees, and fiduciaries will be reimbursed by the Company for
their reasonable expenses incurred in sending proxy materials to beneficial
owners of the Common Stock. The address of World Airways' principal executive
offices is The Hallmark Building, 13873 Park Center Road, Suite 490, Herndon,
Virginia 20171, and its telephone number is (703) 834-9200. The above notice and
proxy statement are sent by order of the Board of Directors.
- --------------------------------------------------------------------------------
Dated: April 29, 1999
By Order of the Board of Directors,
/s/ VANCE FORT
VANCE FORT
Secretary
WORLD AIRWAYS, INC.
1995 STOCK OPTION PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The World Airways, Inc. 1995 Stock Option Plan (the "Plan") is designed to
assist World Airways, Inc. in attracting, retaining and providing incentives to
selected key management personnel by offering them the opportunity to acquire a
proprietary interest in the Company and, thus, in its growth and success.
For purposes of the Plan, the following terms shall have the meanings set forth
below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(c) "COMMITTEE" means the Compensation Committee of the Board, or any
other committee the Board may subsequently appoint to administer the Plan as
provided herein. If at any time no Committee shall be in office, then the
functions of the Committee specified in this Plan shall be exercised by the
members of the Board who are not employees of the Group.
(d) "COMMON STOCK" means shares of the common stock, $.001 par value,
of the Company.
(e) "COMPANY" means World Airways, Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
(f) "CONTROLLING SHAREHOLDER" means any person or entity that (i) owns
at least 50% of the number of outstanding shares of Common Stock, or (ii)
possesses at least 50% of the total combined voting power of all classes of
Company stock, either directly or indirectly, through one or more entities that
are more than 50% owned by such person or entity.
(g) "ELIGIBLE PERSON" means a person described in Section 4 hereof.
(h) "FAIR MARKET VALUE" means:
(i) if the shares of Common Stock are listed or admitted to
trading on any securities exchange in the United States on the
applicable determination date, the closing price, regular way, on such
day on the principal securities exchange in the United States on which
shares of Common Stock are traded;
(ii) if clause (i) does not apply or if no sale takes place on
such day, the average of the closing bid and asked prices in the United
States on such day, as re ported by a reputable quotation source
designated by the Committee;
(iii) if the preceding clauses (i) and (ii) do not apply, the
average of the re ported high bid and low asked prices in the United
States on such day, as reported in the Wall Street Journal (Eastern
edition) or other newspaper designated by the Committee; or
(iv) if the preceding clauses (i), (ii) and (iii) do not
apply, (A) in the case of a Valuation Date described in clause (ii) of
Section 1(q), the price per share at which at least five percent of the
total outstanding shares of Common Stock are sold in an arm's-length
transaction that occurred ten business days prior to such Valuation
Date, (B) in the case of a Valuation Date described in clause (i) of
Section 1(q), (I) the fair market value of a share of Common Stock, as
determined by an independent valua tion firm selected by the Committee
and by WorldCorp (provided that the approval of WorldCorp shall not be
required unless WorldCorp is the Controlling Shareholder) or (II) in
lieu of the valuation provided for by the preceding clause (I) and at
the election of the Committee (with the consent of WorldCorp, if
WorldCorp is the Controlling Shareholder), the price per share at which
at least five percent of the total outstanding shares of Common Stock
are sold in an arm's-length transaction that occurred within ninety
days prior to such Valuation Date; (C) in lieu of the foregoing clauses
(iv)(A) and (iv)(B), the fair market value of a share of Common Stock
as agreed to between the Committee and a Participant (provided that the
consent of WorldCorp to any such agreed upon fair market value shall be
required if WorldCorp is the Controlling Shareholder); or (D) in the
case of the grant of a Stock Option, the fair market value of a share
of Common Stock, as determined by the Committee in good faith (with the
consent of WorldCorp if WorldCorp is the Controlling Shareholder).
(i) "GROUP" means the Company and any affiliate of the Company.
(j) "INCENTIVE STOCK OPTION" means a Stock Option that is intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(k) "INITIAL PUBLIC OFFERING" means the sale of shares of Common Stock
pursuant to an effective registration statement under the Securities Act of 1933
whereby, upon completion of such offering, at least 20% of the total outstanding
shares of Common Stock are held by public shareholders.
(l) "NONQUALIFIED STOCK OPTION" means a Stock Option that is not an
incentive stock option within the meaning of Section 422 of the Code.
(m) "OPTION SHARES" means shares of Common Stock acquired pursuant to
the exercise of Stock Options granted hereunder.
(n) "PARTICIPANT" means any Eligible Person who has been awarded a
Stock Option.
(o) "STOCK OPTION" means any option to purchase shares of Common Stock
granted pursuant to this Plan.
(p) "SUBSIDIARY" means a subsidiary corporation as defined in Section
424(f) of the Code.
(q) "VALUATION DATE" shall mean (i) April 30 of each calendar year;
(ii) the tenth business day following any arm's-length sale (as determined by
the Committee with the approval of WorldCorp, if WorldCorp is the Controlling
Shareholder) by any shareholder of a minimum of five of the total outstanding
shares of Common Stock to any unrelated third party; and (iii) any other date
agreed to between a Participant and the Committee (subject to the consent of
WorldCorp if WorldCorp is the Controlling Shareholder).
(r) "WORLDCORP" means WorldCorp, Inc., a corporation organized under
the laws of the State of Delaware (or any successor corporation).
SECTION 2. ADMINISTRATION.
The Committee shall have plenary authority, in its discretion, to determine the
terms of all awards of Stock Options hereunder (which terms need not be
identical), including, without limitation, the exercise price of Stock Options,
the Eligible Persons to whom Stock Options are awarded, whether an option shall
be an Incentive Stock Option or a Nonqualified Stock Option, the time or times
at which awards are made, the number of shares covered by awards, and the period
during which Stock Options may be exercised. In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective persons, their present and potential contributions to the success of
the Group, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The determinations of
the Committee on the matters referred to in this Section 2 shall be conclusive.
SECTION 3. STOCK SUBJECT TO PLAN; ADJUSTMENTS.
The total number of shares of Common Stock reserved and available for issuance
under the Plan shall be 3,300,000, divided into two series, herein called
"Seried A' and "Series B" The Series A shares shall consist of the 1,800,000
shares of Common Stock reserved by action of the Board on May 24, 1995 and June
17, 1998. The Series B shares shall consist of the 1,500,000 shares of Common
Stock reserved by action of the Board on April 29, 1999. Such shares, whether
Series A or Series B, may consist, in whole or in part, of authorized and
unissued shares or treasury shares. To the extent that any Stock Option expires,
is canceled or otherwise terminates without being exercised, the shares covered
by such Stock Option shall again be available for issuance in connection with
subsequent awards covering shares of the same Series under the Plan.
The maximum number of shares as to which Stock Options may be granted under this
Plan shall be proportionately adjusted, and the terms of outstanding Stock
Options shall be adjusted, as the Committee shall determined to be equitably
required in the event that (a) the Company (i) effects one or more stock
dividends, stock split-ups, subdivisions or consolidations of shares or (ii)
engages in a transaction to which Section 424 of the Code applies or (b) there
occurs any other event which, in the judgment of the Administrator necessitates
such action. Any determination made under this Section 3 by the Committee shall
be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, outstanding
Stock Options or the number of shares of Common Stock reserved for issuance
under this Plan.
SECTION 4. PARTICIPATION IN THE PLAN.
Members of the Board, employees (whether or not they are officers or members of
the Board) and consultants of the Group shall be eligible to receive awards of
Stock Options pursuant to Section 5 hereof. Awards of Stock Options to such
persons shall be made by the Committee, in its sole and absolute discretion, as
provided by Section 2 hereof.
SECTION 5. STOCK OPTION AWARDS.
Stock Options granted under the Plan to Eligible Persons shall be either
Incentive Stock Options or Nonqualified Stock Options; PROVIDED, HOWEVER, that
Incentive Stock Options shall not be granted to persons who are not employees of
the Group. No Stock Option that is intended to be an Incentive Stock Option
shall be invalid for failure to qualify as an Incentive Stock Option. Each Stock
Option granted under the Plan shall be clearly identified as either a
Nonqualified Stock Option or an Incentive Stock Option and shall be evidenced by
a written Stock Option Agreement that specifies the terms and conditions of the
grant. Stock Options shall be subject to the following terms and conditions and
such other terms and conditions not inconsistent with this Plan as the Committee
may specify:
(a) PRICE. The price per share of Common Stock at which a Stock Option
may be exercised shall not be less than eighty-five percent of the Fair Market
Value of the Common Stock on the date of grant of the Stock Option. In the case
of an Incentive Stock Option, the exercise price per share of Common Stock shall
not be less than one hundred percent of the Fair Market Value of the Common
Stock on the date of grant. Notwithstanding the foregoing, in the case of an
Incentive Stock Option granted to a Participant who (applying the rules of
Section 424(d) of the Code) owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or a
Subsidiary (a "Ten-Percent Shareholder"), the exercise price per share shall not
be less than one hundred and ten percent of the Fair Market Value of the Common
Stock on the date on which the option is granted.
(b) EXERCISABILITY. Stock Options granted pursuant to this Plan shall
be exercisable at such times and under such conditions as shall be determined by
the Committee; PROVIDED, HOWEVER, that no Stock Option shall be exercisable
after the expiration of ten years from the date the option is granted (five
years in the case of an Incentive Stock Option granted to a Ten Percent
Shareholder).
(c) PAYMENT OF OPTION PRICE. Subject to Section 5(b), Stock Options may
be exercised, in whole or in part, at any time during the term of the option by
giving written notice of exercise to the Company specifying the number of shares
to be purchased, accompanied by payment in full of the exercise price in cash.
To the extent provided in the applicable Stock Option Agreement, payment may
also be made in whole or in part, in the form of Common Stock already owned by
the Participant based on the Fair Market Value of the Common Stock on the date
the Stock Option is exercised. In no event may any shares of Common Stock that
are acquired by a Participant pursuant to the exercise of a Stock Option be
delivered as payment of the exercise price of a Stock Option, unless such shares
have been held by the Participant for at least six months.
(d) TRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable other than by will or the laws of descent and distribution, except
to the extent required by applicable law. During the lifetime of a Participant
who has been awarded a Stock Option, such Stock Option may only be exercised by
such Participant, except as otherwise required by applicable law.
(e) AWARDS COVERING SERIES B SHARES. Notwithstanding any other
provision of this Section 5 to the contrary, Stock Options as to which Series B
shares of Common Stock have been reserved and are available for issuance shall
be exercisable at one hundred percent of the Fair Market Value of the Common
Stock on the date of grant, and shall vest and become exervisable on the date of
grant for 10% of the underlying shares, one year after the date of grant for an
additional 30% of the underlying shares, two years after the date of grant for
an additional 30% of the underlying shares, and three years after the date of
grant for the remaining 30% of the underlying shares.
SECTION 6. RESTRICTIONS ON THE TRANSFER OF OPTION SHARES PRIOR TO AN
INITIAL PUBLIC OFFERING
(a) Prior to an Initial Public Offering, no Option Shares may be sold,
assigned, mortgaged, transferred, pledged, hypothecated or otherwise encumbered
or disposed of (any such event is hereinafter referred to as a "Transfer")
except as permitted by Sections 6(b) through 6(e) hereof and Section 7 hereof.
(b) If, prior to an Initial Public Offering, a Participant receives a
bona fide offer from an unrelated third party to purchase all or a portion of
the Participant's Option Shares, the Participant shall be permitted to sell such
shares to such third party only in accordance with the terms of this Section 6
and after offering to sell such Option Shares to WorldCorp and the Company in
accordance with the following provisions:
(i) The Participant shall deliver a notice (the "Offering
Notice") to WorldCorp and the Company stating (A) the Participant's
bona fide intention to offer such Option Shares, (B) the number of
Option Shares to be offered for sale, and (C) the price and terms, if
any, upon which the Participant proposes to offer such Option Shares.
(ii) Within ten days after the Offering Notice is given,
WorldCorp and the Company may elect to purchase from the Participant,
at the price and on the terms specified in the Offering Notice, all of
the Option Shares offered in the Offering Notice; provided, however, if
the price so specified is payable in whole or in part in non-cash
consideration, such non-cash consideration shall be valued at its fair
market value on the date WorldCorp and the Company receives the
Offering Notice. The purchase price for the Option Shares may be paid
by WorldCorp or in cash or in WorldCorp Common Stock or by the Company
in cash or in Company Common Stock (valued at fair market value, as
hereinafter defined, as of the date of purchase by WorldCorp or the
Company), or a combination thereof, as determined by WorldCorp and the
Company in its sole discretion. For purposes of this Section 6, the
fair market value of a share of WorldCorp or the Company's Common Stock
shall be the mean between the high and low sales prices of a share of
WorldCorp or the Company's Common Stock as reported on any national
securities exchange as of the applicable date of purchase by WorldCorp
or the Company. Any shares of WorldCorp or the Company Common Stock
transferred to a Participant pursuant to this Section 6 shall be
registered not later than ninety (90) days after the date of trans fer
pursuant to an effective registration statement under the Securities
Act of 1933.
(iii) The closing of the purchase of any Option Shares by
WorldCorp or the Company shall take place at the principal offices of
WorldCorp or the Company (or such other location as the parties may
agree on) on the third business day after the expiration of the
thirty-day period following the giving of the Offering Notice. At such
closing, WorldCorp or the Company, as the case may be, shall (A) agree
in writing with the Participant not to sell or otherwise dispose of
such shares in violation of the Securities Act of 1933, as amended, and
(B) make payment in the appropriate amount by means of a check or by a
wire transfer to the Participant and/or the delivery of WorldCorp or
Company stock certificates registered in the name of the Participant,
against delivery of stock certificates representing the Common Stock so
purchased, duly endorsed in blank by the person or persons in whose
name such certificate is registered or accompanied by a duly executed
stock or security assignment separate from the certificate.
(c) In the event that all of the Option Shares being offered are not
purchased at the closing referred to in subsection (b)(iii), the Participant
shall for a period of 180 days thereafter have the right to sell or otherwise
dispose of the number of Option Shares offered in the Offering Notice, upon
terms and conditions (including the price per share) no more favorable to the
third party purchaser than those specified in the Offering Notice. In the event
that the Participant does not sell or otherwise dispose of such Option Shares
within the specified 180-day period, the right of first offer provided for in
this Section 6 shall continue to be applicable to any subsequent disposition of
such shares to the extent provided by this Section 6.
(d) In the event that the right of first offer set forth in this
Section 6 is not exercised by WorldCorp or the Company, the third party
purchaser of such Option Shares shall not be bound by the terms of Section 6
hereof.
(e) If, on or after January 1, 1997, WorldCorp owns less than eighty
percent (but more than fifty percent) of the outstanding Common Stock of the
Company and an Initial Public Offering hasnot occurred, WorldCorp will use its
best efforts to assist Participants in locating a source of liquidity for their
Option Shares.
SECTION 7. NO RESTRICTIONS ON TRANSFER AFTER AN INITIAL PUBLIC OFFERING;
CERTAIN REPURCHASE RIGHTS.
(a) Notwithstanding the provisions of Section 6 and except as provided
in Section 8 and Section 11(a) hereof, no restrictions shall apply under this
Plan to the Transfer of Option Shares after the occurrence of an Initial Public
Offering.
(b) As of any Valuation Date occurring (i) before the occurrence of an
Initial Public Offering and (ii) after termination of a Participant's employment
for cause by the Group or WorldCorp and its Subsidiaries, the Company or
WorldCorp (if WorldCorp owns eighty percent or more of the outstanding Common
Stock of the Company) may repurchase all or a portion of the Option Shares held
by such Participant or his legatee or legatees at a price equal to the Fair
Market Value of the shares to be acquired. For purposes of this Section 7(b), a
Participant's employment shall be deemed to have been terminated for cause in
the event that the Company determines that the Participant has (i) committed a
felony or a material act of fraud or dishonesty against the Company, any other
member of the Group or WorldCorp or any of its Subsidiaries, (ii) breached his
or her duties of good faith to the Company, any other member of the Group or
WorldCorp or any of its Subsidiaries, or (iii) willfully failed to perform his
or her assigned duties after at least two (2) warnings specifically advising the
Participant of his or her shortcomings and providing the Participant with a
reasonable "cure" period.
SECTION 8. REGULATORY APPROVAL AND COMPLIANCE.
The Company shall not be required to issue any certificate or certificates for
shares of its Common Stock with respect to awards under this Plan, or record any
person as a holder of record of such shares, without obtaining, to the complete
satisfaction of the Committee, the approval of all regulatory bodies deemed
necessary by the Committee, and without complying, to the Committee's complete
satisfaction, with all rules and regulations, under federal, state or local law
deemed applicable by the Committee.
SECTION 9. WITHHOLDING TAXES.
The Company's obligation to deliver shares of Common Stock to a Participant upon
the exercise of a Stock Option shall be subject to the Participant's
satisfaction of any applicable federal, state and local tax withholding
requirements. The Committee may, in its discretion, and subject to such rules as
it may prescribe in its discretion, permit a Participant to satisfy applicable
tax withholding obligations by any of the following means or by a combination of
such means: (a) tendering a cash payment; (b) authorizing the Company to
withhold from the Common Stock otherwise issuable to the Participant as the
result of the exercise of a Stock Option, a number of shares having a Fair
Market Value, as of the date the withholding tax obligation arises, less than or
equal to the amount of the withholding tax obligation; or (c) delivering to the
Company already owned and unencum bered shares of Common Stock having a Fair
Market Value, as of the date the withholding tax obligation arises, less than or
equal to the amount of the withholding tax obligation.
SECTION 10. AMENDMENT AND TERMINATION.
The Board may amend, alter or terminate the Plan in any respect at any time.
Notwithstanding the foregoing, no amendment, alteration or termination of the
Plan shall be made by the Board without approval of (i) WorldCorp, if WorldCorp
is the Controlling Shareholder at the time of the amendment, alteration or
termination, and (ii) each affected Participant if such amendment, alteration or
termination would impair the rights of a Participant under any award theretofore
granted.
The Board (with the consent of WorldCorp, if WorldCorp is the Controlling
Shareholder) may amend the terms of any award theretofore granted, prospectively
or retroactively, but no such amendment shall impair the rights of any
Participant with respect to such award without such Participant's consent.
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each person acquiring shares pursuant to
awards hereunder to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to distribution thereof. The
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock issued pursuant to the Plan shall be
subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Common
Stock is then listed, and any applicable federal or state securities laws. The
Committee may place a legend or legends on any such certificates to make
appropriate reference to such restrictions.
(b) Nothing contained in Section 6 shall prohibit a Participant from
delivering Option Shares to the Company to exercise a Stock Option in accordance
with Section 5(c) hereof or from authorizing the withholding of Option Shares or
delivering Option Shares to the Company to satisfy applicable tax withholding
requirements in accordance with Section 9 hereof. Upon the death of a
Participant, Option Shares may be transferred by will or the laws of descent and
distribution to the legatee or legatees of the Participant. The Transfer of
Option Shares by such legatee or legatees shall be subject to the provisions of
this Plan as if such legatee or legatees were the Participant.
(c) Nothing contained in this Plan shall prevent the Board or Committee
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Group any right to
continued employment with the Group, nor shall it interfere in any way with the
right of the Group to terminate the employment of any of its employees at any
time.
(d) No member of the Board or the Committee, nor any officer or
employee of the Group acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Group acting on their
behalf shall, to the extent permitted by law, be fully indemnified and protected
by the Company in respect of any such action, determination or interpretation.
(e) The masculine pronoun wherever used shall include the feminine
pronoun, and the singular shall include the plural unless the context clearly
indicates the distinction.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is adopted by the Board (the
"Effective Date"), subject to the approval of the Plan by the Company's
Stockholders.
SECTION 13. TERM OF PLAN.
Unless the Plan shall have previously been terminated in accordance with Section
10, the Plan shall terminate and no Stock Options shall be granted pursuant to
the Plan after the tenth anniversary of the Effective Date. Notwithstanding the
foregoing, all Stock Options granted under the Plan prior to such date shall
remain in effect until such Stock Options have either been exercised or have
expired in accordance with their terms and the terms of this Plan.
SECTION 14. GOVERNING LAW.
This Plan shall be construed, administered and enforced according to laws of the
State of Delaware, without giving effect to the principles of conflicts of law
thereof.
[Effective Date: May 31, 1995
Stockholder Approval Date: May 24, 1995]
